Cash back health insurance in Connecticut

Successfully placing benefit plans for businesses and individuals comes down to forging solid relationships built around trust. It helps also to have a unique product or offering that your competition does not offer. One product that fits this description is with a plan design offered by Trustmark.

All premiums collected by insurance carriers get divided up and placed into separate “buckets” for costs such as claims and administrative expenditures.  While “healthy” group trend lower with rate increases at renewal, one company takes this a step further.  

Trustmark processes their premium income the same way as above, but puts aside the claims portion of the premium into a separate account.  If the claims activity of the group is low throughout the contract year, then the company receives a reimbursement check.  This plan works particularly well with groups that tend to skew younger such as some of the blue collar trades, coffee shops, or those companies offering many entry level positions. 

One hurdle that can be problematic is that while carriers require all enrollees to fill out family health statements at time of application,  Trustmark needs all this information prior to the application in order to determine the exact premium.  There are cases when this program does not price out competitively with the other market options due to the health history of the group,  but when it is a right fit, it can be a boon to both the agents and their prospective new clients.

777 HHS Waivers to Obamacare – Logical & Ludicrous

The current total number of waivers to Obamacare has reached 777.  No, this has nothing to do with a new Boeing jetliner.  These are the waivers of compliance to the initial phases of  the Patient Protection & Affordable Care Act  (Obamacare) that Health & Human Services is handing out  to insurance companies, unions, &  other various organizations.  While qualification for the waivers range from political to religious,  the following discussion highlights two such waivers; one logical, and one ludicrous.  Intended or otherwise, they tell the tale of an unread Trillion dollar piece of legislation.

The recent spike in these waivers is mainly due to the Medical Loss Ratio (MLR) mandate that took effect January 1, 2011.  This mandate requires insurance carriers to pay out 80% to 85% of what they receive in premiums as claims.  Further, carriers were no longer allowed to cap lifetime benefits, are have internal benefit caps for services within the policy.   The spirit of this portion of the law was to rid the marketplace of so called “mini-meds”; plans that impose caps on services for hospital, surgery, RX, etc.  Current MLR ratios are around 60% for those carriers that offer these mini-med plans to businesses.   As these carriers have substantially higher administrative costs due to the high turnover rate amongst the enrol-lees, coupled with relatively low reimbursements, they simply cannot comply with the MLR mandates.   Many companies who employ low wage hourly workers, such as McDonald’s, utilize these limited benefit plans as a way to offer health coverage at a relatively low cost for both employer & employee. While these plans do impose caps on major services, and place internal maximum benefits for surgery, hospital, etc.,  they are very good at covering the preventive services, such as physicals, mammograms, ob/gyn, etc.  Most offer co pays for doctor visits, specialists, & prescription drugs.  Headlines made it appear that McDonald’s was canceling coverage for it’s enrol-lees, when in fact it was the insurance carrier informing them that without a waiver from HHS, they could no longer offer the plan design to McDonald’s.  Home Depot, CVS & Staples all offer similar plan designs.  In these instances, a waiver from HHS is a realistic & logical approach to this problem, as the alternative would be to have no coverage at all for these low wage workers.

Independent producers such as myself loath to discuss how they receive compensation for the work that they do.  Suffice to say that our agency does not charge for our services as we get commissions from the carriers when we place a client.  The above MLR mandate has significantly lowered commission schedules to producers of health insurance by 50% to 80%, albeit with a rather disturbing exception.  Our office writes for any and all carriers that offer health insurance plans, both group and individual, in Connecticut.  One such carrier is Celtic, which contracts with PHCS as their nationwide PPO.  We were pleasantly surprised to receive notification from Celtic that our commission structure would be reduced only slightly.    We contacted the carrier to inquire how this was possible, and they informed us that HHS issued them a waiver so that the Federal Government could assist them in gaining market share over their competitors. Welcome to ludicrous.  This goes hand in hand with HHS threatening carriers with exclusion to the exchange plans coming in 2014 due to perceived unjustified rate increases.  Now, I am not about to look a gift horse in the mouth, but our agency has prided itself on placing people in the right plan for them regardless of commission levels.  Responsible agents are now in the unenviable position of still trying to assist those in need of procuring health insurance while providing for their families at the same time.  Those of us who remain in this industry will have to close twice as many contracts as the year prior in order to retain current income levels.  One wonders if those elected officials who both helped to craft and pass this legislation, are now overjoyed with HHS dictating winners and losers.  Worrisome still is if HHS can begin to manipulate the market with only these initial phases of Obamacare in place, what happens to their regulatory control as the rest of Obamacare is implemented over the course of the next few years?

Case Study Small Business Tax Credit

Small Business Health Care Tax Credit

The Patient Protection and Affordable Care Act

Vanilla LLC. – Case Study 2010

As part of the bill signed into law by President Obama on March 23^rd of 2010, small businesses may be eligible for a maximum 35% tax credit for companies that provide health insurance to their employees.

To qualify for the full 35% tax credit businesses must:

• Pay for at least 50% of the insurance premium.
• Have 10 or fewer full time employees (FTE’s).
• Pay out annual salaries of up to $25,000 per employee.
• Premiums must not exceed the average premium for small group market in each State set by HHS. (Connecticut average per employee premium small group market = $5419 Employee 13,484 Family annually or $452 and $1123 monthly.)
  

The 35% tax credit is a sliding scale as average salaries are above $25,000 to a maximum of $50,000, and number of full time employees exceeding 10 to a maximum of 25.

The following case study for Vanilla LLC will represent all of the above stipulations:

• Vanilla LLC has 8 full time employees and has an average annual per employee payroll of $24,500.
• 3 EE’s and 4 Families
• Total health insurance premium for Vanilla LLC is $70,200. $5850 per monthly

The company pays half of the health insurance premium totaling $35,100 – $2925 monthly

Vanilla Inc. will receive a tax credit for 2010 of $12,284.00. Vanilla LLC earns $100,000 annually putting the owner in the 28% tax bracket that also pays about 15% in social security taxes.

This tax credit of $12,284 is equivalent to a pre-tax savings of $21,551. $21,551 of earnings after taxes would come out to $12,284. The $35,100 of premium the owner has already paid out now costs him only $13, 550 or $1129 monthly. This represents a 61% savings in health insurance premiums.

Actual case study for Clean-All in Brookfield:

• Clean-All has 7 full time employees with an average annual salary of $31,000.
• Clean-All’s share of the premium equals $12,414 or $1034 monthly

After accounting for salaries exceeding $25,000, and adjusting for the maximum premium allowed, the total amount of tax credit for Clean-all in 2010 = $2156.

This tax credit of $2156 is equivalent to a pre-tax savings of $3782. $3782 of earnings after taxes would come out to $2156. The $12,414 of premium the owner has already paid out, now costs him only $8640 or $720 monthly. This represents a 30% savings in health insurance premiums.